Rent control simulation for Mexico City

Author

Girault, Jose Pablo

Date

1993

Degree

Master of Arts

Abstract

A model, based in the current rent control legislation, of landlord's rent setting behavior is used to simulate rents that are then compared to an actual sample of rents from Mexico City. The paper assumes that landlords take into consideration the present value of future rent payments when setting new rents. This behavior nullifies the effects of rent control for the new tenant. Over a period of time tenants enter into a new contract and lose the benefits of the rent control law. The initial rents will be higher than what they would have been had there been no rent control. The main objective of the law, to reduce rents and to protect tenants against increases every year, is defeated after a period of time.